Caltex confirms making conditional and confidential bid for fuel business of Woolworths

Fuel refinery and retailing giant Caltex placed a conditional and confidential proposal to purchase the fuel business of supermarket giant Woolworths. While the company did not divulge the amount of its bid, there is speculation the bid was in the area of $1.5 billion.

But ABC reports that Caltex has a potential competitor for the Woolworths’ fuel business. The rival could be BP, according to the Australian Financial Review which says the UK-based energy giant gas “its nose in the front” of the bidding battle, creating a showdown between the two energy giants.

BP currently controls 11 percent of the retail fuel market in Australia. Caltex holds 16 percent, while almost 21 percent is owned by Woolworths which has about 600 outlets throughout Australia. If Caltex would win the bid, it would be majority at almost 40 percent.

As retailer, Caltex supplies fuel to Woolworths’ petrol stations. Annually, its business with the supermarket giant is about 3.5 billion litres of fuel.

Woolworths is disposing of its fuel business as a result of an ongoing corporate restructuring caused by big losses suffered from its venture into home improvement business. But even the fuel retail business is also dragging Woolworths’ finances since sales revenue from the petrol stations declined 18 percent to $4.6 billion in 2016 from $5.6 billion in 2015.

In a statement on Tuesday, Caltex says since the sale process is ongoing and the transaction remain uncertain may take time to complete, the company promised to update the market as appropriate if there are material changes to the existing wholesale supply arrangement of Caltex with Woolworths, The Australian reports.